Bankruptcy Proceedings And The Insolvency Act In Singapore

by 30 August 2023Knowledge & Insights

In the unpredictable waters of financial management, encountering the perfect storm of escalating debt and diminishing resources can be a daunting experience.

In Singapore, bankruptcy looms large over individuals finding themselves in such predicaments. However, understanding the intricate bankruptcy landscape encapsulated within Singapore’s Bankruptcy and Insolvency Act can guide you through the tumultuous voyage.

This article elucidates the complex procedures of bankruptcy proceedings, the legal status and implications of being an undischarged bankrupt, and the potential paths to regaining financial stability.

The Bankruptcy And Insolvency Act In Singapore

The Bankruptcy and Insolvency Act of Singapore is the cornerstone legislation governing personal and corporate insolvency issues.

It establishes a clear, comprehensive framework detailing the process of declaring bankruptcy, the specific criteria for filing, the responsibilities of the bankrupt individual, the restrictions they must adhere to, and the essential steps towards achieving a discharge from bankruptcy.

This Act is the guiding document for legal proceedings and provides a pathway to manage and, eventually, overcome insolvency.

Why Choose Bankruptcy? The Potential Benefits

While bankruptcy might initially seem like the end of the road, it can serve as a protective mechanism for individuals overwhelmed by unmanageable debt in specific scenarios. Bankruptcy provides relief, offering individuals a structured way to address their seemingly impossible debts.

One significant benefit is the implementation of the ‘automatic stay’, which halts all debt collection efforts, foreclosures, repossessions, and lawsuits against the debtor. This breathing space allows the individual to regroup and plan their next steps without the continuous pressure from creditors.

Additionally, bankruptcy can lead to a discharge of certain debts owed, giving the individual an opportunity for a fresh financial start.

Relevant Statistics In Singapore

According to the Ministry of Law, there were 1,477 orders of bankruptcy made in Singapore in 2021. While these numbers may appear daunting, they reflect the economic impact of the ongoing global pandemic on individuals and businesses alike.

Despite the relatively high figures, it’s worth noting that 662 individuals successfully received their discharge from bankruptcy in the same year, underscoring the potential for financial recovery.

Who Can Be Declared Bankrupt In Singapore?

According to the Bankruptcy and Insolvency Act, any person in Singapore with a debt exceeding $15,000 can be declared bankrupt.

The commencement of bankruptcy proceedings can be initiated by either the debtor themselves, recognising their inability to meet financial obligations, or by their creditors, in an attempt to recoup owed sums.

Nevertheless, the severe implications and long-term effects on one’s financial and personal reputation require careful consideration before embarking on this process.

Getting To Know The Official Assignee

An essential figure to understand in the bankruptcy process in Singapore is the Official Assignee (OA). The OA plays a significant role in managing the bankruptcy proceedings and is primarily responsible for administering the affairs of the bankrupt.

The OA’s role is multifaceted. They take charge of the bankrupt’s assets, which includes selling them to pay off outstanding debts. The OA also assesses the bankrupt’s income and expenses to determine a reasonable monthly contribution towards the repayment of the debts.

Additionally, the OA acts as the main point of contact for creditors. They manage all communication and negotiate on behalf of the bankrupt, effectively taking the pressure off the individual.

Furthermore, the OA plays an instrumental role in guiding the bankrupt through the process. They provide information on the obligations and restrictions of the bankruptcy and can grant permissions for matters like overseas travel.

Building a good working relationship with your OA can be beneficial. Being cooperative, transparent, and prompt in your dealings with the OA can contribute towards a smoother bankruptcy process. It can also potentially accelerate your path to discharge, marking the end of your bankruptcy journey.

Life After Bankruptcy: What to Expect

Upon filing for bankruptcy, one enters the status of an ‘undischarged bankrupt’, bringing about significant changes to daily life. While daunting, these changes are manageable with a proactive approach and a clear understanding of all your assets and obligations.

However, life after bankruptcy is not all gloom. It offers a chance to rebuild your financial habits, learn how to manage your finances better, and eventually regain control over your financial future.

Remember, bankruptcy is a process, not a life sentence. With hard work, persistence, and good financial management, you can work towards your discharge and a fresh financial start.

Professional legal guidance can make the journey significantly smoother if you need to help understand or navigate the intricacies of bankruptcy. Contact us for tailored advice and support during this challenging period.

Understanding Bankruptcy Proceedings In Singapore

Bankruptcy proceedings in Singapore are meticulous and follow a strict, legally governed process. The initial phase involves filing a bankruptcy application in  Court, which triggers a series of actions upon approval.

The appointed Official Assignee assumes control over the bankrupt debtor’s estate assets, ensuring equitable distribution of liquid assets to all creditors.

The debtor is also obligated to contribute towards their debt repayment from their income. The gravity of the consequences of bankruptcy underscores the need for professional advice and comprehensive understanding before filing for bankruptcy.

The path of bankruptcy, though challenging, does not have to be a lifelong sentence. Understanding the process and the implications is the first step towards managing the situation and eventually working towards a debt-free future.

Finding Your Way Out Of Bankruptcy

Navigating the path to discharge from bankruptcy in Singapore requires a thorough understanding of your rights and obligations in legal proceedings, as well as a consistent commitment to repay your debts. Here are the common ways to exit bankruptcy:

Full Payment Of Debt

If you can arrange for the complete repayment of your debt, you can apply to the Official Assignee or the  Court for a discharge.

Negotiated Settlement

You may negotiate a settlement with your creditors for a reduced sum. If the creditors and the  Court accept the agreement, you can be discharged from bankruptcy.

Time-Based Discharge

Under the Bankruptcy and Insolvency Act, first-time bankrupts can be discharged automatically after seven years, and repeat bankrupts after nine years. However, certain conditions need to be met, such as cooperating with the Official Assignee and making regular contributions to your bankruptcy estate.

Discharge By The Court

In certain circumstances, the Court can grant a discharge based on the specific facts of the case.

Alternatives To Filing For Bankruptcy

Before committing to bankruptcy, it’s essential to consider all available alternatives, as bankruptcy can have far-reaching implications. Here are some options:

Debt Repayment Scheme

A Debt Repayment Scheme involves negotiating with your creditors to set up a manageable plan of monthly contributions to repay your debts over time.

Debt Consolidation Plan

This is a debt refinancing program where a borrower consolidates multiple debts into a single loan, often with a lower interest rate.

This way, a person won’t have to repay debts owed to several financial institutions each with it’s own interest rate. This makes the repayment manageable.

Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement between you and your creditors where you agree to pay all or part of your debts over a period.

The arrangement needs to be approved by the  Court and administered by an insolvency practitioner.

Informal Arrangement

You can negotiate directly with your bankrupt’s creditors, to agree on a reduced payment or extended timeline.

Remember, each alternative has its pros and cons, and what might work for one person may not be the best solution for another. Consulting a professional for personalised advice based on your financial situation can provide the clarity needed to make an informed decision.

Please feel free to reach out to us if you’re considering any of these options or if you need guidance on bankruptcy matters.

Conclusion On Declaring Bankruptcy In Singapore

Traversing the complexities of bankruptcy in Singapore is an arduous journey. Still, it becomes significantly less daunting with a thorough understanding of the Bankruptcy and Insolvency Act, the procedures of bankruptcy proceedings, and the realities of being an undischarged bankrupt.

Empowering oneself with knowledge is crucial as it illuminates the path forward and contributes to informed decision-making, reducing unnecessary anxiety and stress. If you’re currently facing the possibility of bankruptcy or are already engaged in bankruptcy proceedings in Singapore, you might find it beneficial to have a legal expert on your side.

Availability of bankruptcy lawyer services could be your vital support if you are on the verge of declaring bankruptcy. Please feel free to contact our team at Tembusu Law for any assistance or legal advice related to bankruptcy in Singapore. Remember, seeking professional help early could be instrumental in safeguarding your financial future.

Frequently Asked Questions About Declaring Bankruptcy In Singapore

Who Manages The Bankrupt’s Assets?

The Official Assignee, an officer of the Court, takes control of the assets to repay creditors.

Can I Still Be Employed If I’m An Undischarged Bankrupt?

Yes, you can continue to be employed. However, certain professions may have restrictions or require you to inform your employer of your bankruptcy status.

Can Bankruptcy Be Removed From My Credit Report In Singapore?

Yes, but only after you’ve been discharged from bankruptcy. The record will remain on your credit report for five years from your discharge or two years from the order date, whichever is later.

What Is A Debt Repayment Scheme In The Context Of Bankruptcy In Singapore?

A debt repayment scheme is an arrangement, usually proposed by a debtor who earns a regular income, that allows the outstanding debt amount to be repaid over time.

This scheme is designed to avoid the need for a bankruptcy order, offering an alternative route to resolve outstanding debts through monthly contributions.

As A Creditor, How Can I Recover Debts Incurred By A Bankrupt Individual?

Suppose an individual owing you money has been declared bankrupt. In that case, you must file a Proof of Debt with the Official Assignee. You’ll then become a creditor in the bankruptcy proceedings, and any recovery will be made from distributing the bankrupt’s assets.

What Is A Bankruptcy Order, And How Is It Issued?

A bankruptcy order is a legal declaration made by the  Court that a person cannot repay their debts and is therefore declared bankrupt.

It is issued after a Bankruptcy Application has been filed and reviewed in  Court, either by the individual themselves (debtor’s application) or by the person or company to whom they owe money (creditor’s application).

Can Court Action Be Taken Against Me Once I’m Declared Bankrupt?

After a bankruptcy order is made, unsecured creditors are generally prohibited from initiating or continuing with legal actions against the bankrupt without the  Court’s permission.

This protection is called a ‘stay of proceedings and is automatically triggered once the order is issued.

Is It Possible To Void A Bankruptcy Order?

A bankruptcy order can be annulled or made void under certain circumstances. These include the full repayment of debts if the order should not have been made in the first place or if the bankrupt enters an Individual Voluntary Arrangement (IVA) with their creditors.

An application needs to be made to the  Court to annul the bankruptcy order, and seeking legal assistance in such cases is advisable.

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